Dow Hits New High, 59% of Americans Think The Economy Is In A Recession

By the irony of timing, the Dow hit an all-time high as markets opened. Even Apple rallied. Exuberance wafted through the air. Hype was flowing thickly. The happy days were back. New highs beget new highs. And everyone knew why: the Fed’s money-printing and asset-purchase operations. By the irony of timing... because 30 minutes later, kitchen-table reality polluted the scene.

Through surveys, the IBD/TIPP Economic Optimism Index measures how Americans feel about the economy—from the kitchen table, so to speak. After a 5.1 point nosedive, it hit 42.2, the lowest since December 2011 (50 = neutral). The 10.8% decline was the worst since August 2011. Personal financial outlook declined 4.4% to 52.2 but remained positive. Confidence in federal economic policies dropped 11% to 35.5. The six-month outlook plunged 18% to 38.8, the lowest since October 2011—which, the report said, “perhaps signals a turning point and an impending entry into a recession.”

“Americans across the board think that the economic outlook is grim,” the report explained, pointing out that 59% of Americans, given their declining real wages, if any, think that the US is already in a recession—readings that “haven’t changed much in recent months.”

Nevertheless, the Dow surged to 14,254. Previous record: October 9, 2007, when it closed at 14,164. Of course, on an inflation-adjusted basis, there is still some room left. But on this glorious day, we won’t quibble. Instead, we’ll look at what happened less than a month after the previous high: on November 7, 2007, Cisco CEO John Chambers said out loud what had been known for a while, and what the stock market had simply brushed aside.

After discussing Cisco’s earnings, which were just fine, he ventured into the future. US companies, he said, “probably as a surprise to no one,” were experiencing “some softness,” and growth in the US would be “very lumpy.”

Markets went south. The credit bubble was cracking. The housing bubble and other bubbles were blowing up before our eyes. The conditions that would become the financial crisis were lining up. A rough ride until stock markets reached their lows in March 2009. By that time, the government was running structural deficits of well over $1 trillion per year without end in sight, the Fed was handing trillions to banks, domestic and foreign, and other companies, like GE, to bail them out, and it was buying up ever more assets. Other countries did the same.

It started a bull market—and the largest credit bubble the world has ever seen, along with other bubbles, some obvious, some not so obvious, such as the farmland bubble, some of them mature, others in their infancy. And they all, as we’ve learned for the nth time, blow up—even while the Fed denies that they exist.

In Europe, the various bubbles also turned into a financial crisis, which turned into a debt crisis that morphed into an economic crisis. China re-inflated its bubbles with such vigor that now even insiders admit publically that they’re afraid of them: Wang Shi, chairman of Vanke, China’s largest property developer, when asked by CBS, if there was a housing bubble, simply said, “Yes, of course.” And if it burst, that would be a “disaster,” he said. A disaster not just for China but for the economies that depend on it, including big exporters, such as Germany and Japan.

But this time, it’s different. Again. Everybody knows why. Even the New York Times. It put an article at the top of its front page, specifically naming the Fed’s relentless money-printing and asset-purchasing operations as primary impetus behind the new high. There is no longer any pretense that this has anything to do with fundamentals or the economy or with corporate health. Even the New York Times admits that the driver behind this new high is the confidence that the Fed will continue to pump $85 billion a month into the markets, ad infinitum, and if anything “very lumpy” shows up, it will print even more.

Conversely, “everybody” knows something else: if that confidence ever sags.... We’ve seen the results. Twice. QE1 had a limit. When that limit approached, stocks swooned. QE2 had a limit, and when it approached, stocks swooned. So, QE3 doesn’t have a limit.

Yet, the benefits are reserved largely for those with access to this money. While some of it trickles down into the real economy, most of it simply drives up asset values, bypassing the people at the kitchen table.

But the day that the Fed ends its purchases, or declares that it will—rather than just palavering about it—the run for the exit begins. Those with 401(k) will be at work and won’t see their statements for weeks. When they do, the shock will freeze them into position. The process of decimation will start all over again.

In Italy, they’ve had it.... Former Italian senator Sergio De Gregorio confirmed that he’d received €3 million in 2006 from Silvio Berlusconi. “Of course I took the money,” he said. It brought Berlusconi to power. Seeing this sort of thing on a daily basis, 8.7 million frustrated and angry Italians voted for Beppe Grillo’s 5-Star movement. It wasn’t enough to govern, but it was enough to give the political establishment conniptions—and show that anger and frustration finally count. Read.... Fear of Nuremberg Trials For Corrupt Italian Politicians.

Finance does not require the Fed or anyone else to create the credit needed to kick its own market upstairs!

It's own market! Those who believe central bank credit is needed to 'buy into markets' is making Paul Krugman's argument!

Fine! The Fed is broken and Bernanke is a villain, however he is not the cause of the current crisis. If he were to disappear tomorrow and never return the crisis would be in full force, it would intensify and eventually crush the current form of doing business.

The crisis will do these things anyway, Fed or no Fed. Central banks or no central banks. Governments or no governments. What the establishment attempts is a rear-guard action, to postpone the inevitable: what the Fed does is allow criminals to steal what can be had in a hurry, to rent out seats on the lifeboats on the Titanic.

We are undone by 400 years of our own success, our problem is at the end of your driveway: our cumulative waste of what our economy needs to run tomorrow and the day after ... this has finally caught up with us.

You want to fix the economy, get rid of the cars, forget the Fed.

If you don't get rid of the cars they are going anyway, along with the petroleum fuel, along with all the things that go along with the cars. There will be conservation by other means. You really don't want to know what those other means are.

agree steve, however, one must not forget that the 3rd central bank of the US came along just at the same time as the automobile (and the "adoption" of petroleum to fuel them). all great monetary expansions since then in this country (WWII, post-war, R/E bubble) have revolved around petrol.

just posing a point....so with qeternity and the crushing of the $ commodities are inflating in price rt??? twice as much$ to buy the good...it seems to me that it translated to the stock market as well...for centuries the common philosophy was high oil bad for stocks....high stocks bad for bonds...but then a very interesting thing happened one day...someone realized that if the dollar weakens shouldnt all us dollar denominated assets go up in value??????

I've come up with a new term 'Concord Moment', and it's that point in time, like back then in 1774, when the Revolution will start. I don't know where the 'Concord Moment' will happen, or when, but it's coming.

Who is driving the bus? The Fed is printing $85B a month which goes straight into the market via JPM, Citi, BAC, etc. This debt infused euphoria currently in stocks is nothing more than the Real Estate bubble revisited. The Treasury needs the pretense that financial conditions are good. Hence, QE continues indefinitely.

God Bless writes " Wake up America." Com'on. America doesn't want to wake up. The slumber is good. As long as Uncle Sam keeps giving handouts there will be no discomfort, no riots, and no one facing the tax man. The cold water in the face will occur when interest rates are forced to rise. Hyperinflation kicks in followed by depression. No politician is going to make America wake up. Watch what happens around March 2014 when Americans realize the impact of Obamacare. That could possibly be a game changer. Otherwise, nothing happens for several years.

It's finally sadly all coming around with the bots on the Street controlling all the money...and we only get what the bots are programmed to let us have as the 99%.

These bots from insurance companies buy all your recorded purchases, where you eat lunch, buy at the store an so forth...bot drop big profits to corporate USA with this...Walgreens data selling bots yielded closed to $800 million in 2010...just selling data only.

I would really like to see the day when we have government employees that are smart enough to actually supboena a mathematically credited financial model to prove fraud...government needs the anti-quants at work:)

1st, the economy is absolutely booming, and the markets would be as high or higher without the Fed's ZIRP/NIRP and the Federal Reserve's (as well as just about every other central bank) pumping fiat by the quantrillion load to buy worthless "assets" at 100x FMV from the banks/financials (too-big and not-really-too-big-but-we'll-claim-it-anyways entities) and generally into the banking sector.

2nd, if it was a good time to buy the very solid, stable instruments known as "shares of equity" at prices that were 1/3 less, 2/3rds less or 9/10ths less 4 years ago, it's an even better time now.

We have entered a phase of the world economy that will be looked upon with horror 100 years from now, much like the world wars of the last century. There is a full on war going on, waged not with bombs, but currencies and monetary policy. The everyday casualties will be hidden initially (poverty, food stamps, suicides) by the cries of victory from the economists and politicians... but the front lines are becoming more and more visible. Greece. Arab Spring. Argentina. Italy. The list goes on. As the pressure in the system builds from a false recovery, the outcome, over a period of years, will be widespread unrest.

The reason this will not end until it completely explodes/collapses, is that unlike physical weapons which require material resources and supply chains, the weapons in this war are zeros and ones and bond purchases. Seems so innocuous. Those future generations will marvel at how obvious the flaw in this thinking was - debasing the value of people's savings, the value of their work, simply to put on a good show in the markets.

There are those on this site that believe this is all doomsaying, but the fact of this article is clear: how can it be a recovery when so many are hurting financially? There is no recovery. This is an economic war, and it may last decades, but it will end with both a bang and then a whimper.

When you boil it down, large-scale central planners fail because they believe three things that aren’t true.

First, that they know current conditions (wants, desires, hopes, capabilities, resources). In other words, that they know the exact and entire present state of the community they are planning for.

Second, that they know where the community ought to go; that is, that they know what the future ought to be.

Third, that they are capable of creating the future they want.

None of those things is more than an illusion. Together, they constitute what F. A. Hayek called “the fatal conceit that man is able to shape the world around him according to his wishes.”

As to the first point, central planners cannot know current conditions because that would require an infinite amount of information. It would require “minute knowledge of a thousand particulars which will be learnt by nobody but he who has an interest in knowing them,” wrote Samuel Bailey in 1840.

The planners have nothing like that. Instead, they have a body of public knowledge, which as we have seen is nothing more than popular theories, claptrap and statistical guesswork.

As to the second point — that the central planners are blessed with some gift that tells them what the future should be for complete strangers — we pass over it without argument.

No one really believes that people in the U.S. Congress or the French National Assembly… or in the bureaucracies and think-tanks of these nations… has anything more to guide him than anyone else (which is to say only his own likes and dislikes, prejudices and fears, and self-serving ambitions.

RR - thank you for this interesting post. I wonder if this is simply borne of conceit, or more accurately a desire to control the environment using the only tools available to those in power. What is horrifying is if they have rationalized this madness, and plan on taking it to the bitter end. That is, they MUST continue, because they MUST save the world and are the only heroes available to do it... and sadly, are destroying it in the process.

Methinbks that they will float a coule trial balloons before slowing down QE 4 or is it 5? Mkt will correct 10%, and amongst wailing and knashung of teeth, then you will hear the Lame Stream Media cheering to continue the $85B / mth.

They will speak of hungry and homeless children, of racism, of the rich whiteman and income inequality.

Thats the way left wing facsists roll. It worked for Chavez for 8 years (while he was amassing his personal $2B fortune).

the stock market leads the economy [according to most including Bob Prechter, who has been wrong for a long time because he assumes there is still an efficent market] obvioiusly 59% of Americans don't believe in an efficient market [damned Socialists!]

If you want to save the Republic, you better stop wasting all of your efforts on the puppet class. Every single person you railed against is FULLY replaceable by hundreds of other power-seeking sociopaths.

Either focus on the true puppet-masters, or just give it up already, as all you're doing is to further empower them over you.

Politicians are TOOLS. Tell me, how often do you blame your hammer when you smash your thumb?

They can do nothing without our involvement. The stock market can only really hurt us if we give them our money to play with. Yes, they have a shit load of it themselves, but where do you think they got it? We keep losing jobs because we will absolutely refuse to stop buying the cheap imports. We blame the rich, big business, big gov, bankers and just about everyone else, but never do we look at ourselves as the culprit. I challenge anyone to go about building something, anything with their own two hands that can be purchased at any retail store and you will be faced with two circumstances. Either you will have to sell at such a ridiculasly low price that you would likely starve or you will be told you are nuts for asking as much and leave with no sale. Your neighbors, hell probably your family, will refuse to pay you what would amount to a living wage for what you could build. We have given away our jobs and our industries. We blame business for moving our jobs off shore yet we have insisted on buying only off shore goods. I watched this in the 70's when everyone was screaming about the Japanese taking our car companies but I asked Toyota drivers why they didn't buy domestic and they replied that the Japanese cars were better AND cheaper. Fat people blaming McDonalds and everyone blaming business because of no jobs. We used to have "Industry on Parade" Now we have "Ignorance on Display"! How long can we continue to blame the people fucking us when we are so well already bent over?

We are seeing it at the kitchen table, the increase in the cost of food and services that are hitting the pocket book. That printing aka monetization of debt to the tune of 85 billion a month is cooking the books and cooking the economy artifically. If it was doing so well it wouldn't need 85 billion a month until we say stop to continue. All this is a delaying action to figure out what to do next pure and simple. And to be hones with you I think they are left with printing and stealing (you'll see what that is, taking of 401k accounts into SS and other things).

I've always said that we are really in a depression but they can't say the D word because it's political suicide. This depression was papered over and not fixed. And it's showing it's head once again and the papering isn't working anymore.